Analyst: Vista to Have Short-term Negative Impact on Apple

Although the lackluster sales of Microsoftis Windows Vista operating system are below resellers expectations, the number of PCs sold is on the rise. That increase is driven by the PC refresh cycle for Vista, and will likely have only a short term negative impact on Appleis Mac market share, according to Piper Jaffray analyst Gene Munster.

A survey of 50 Best Buy stores revealed that about 80 percent of the locations are selling fewer copies of Microsoftis new operating system than expected. 72 percent of the stores are also stating that Vista is driving sales of new PCs to consumers. The increase in PC sales is due to a pent up demand for computers with Windows Vista pre-installed.

That demand will likely have a short term negative effect on Mac market share in the March quarter, but also presents Apple with an opportunity to sway more users away from Windows. Mr. Munster commented "As PC buyers consider upgrading to Vista, which in many cases involves the purchase of a new computer, Apple is recognizing its opportunity to gain mind share with consumers. The company views this season of Vista-related computer purchases as an opportunity to sell more Macs."

Apple is also taking advantage of the fact that many PC users will have to purchase a new computer if they want to use Vista. The company launched an email campaign targeted at iPod owning Windows users titled Upgrading to Vista? Think Mac, and also produced several TV commercials in the U.S., U.K., and Japan that point out flaws in Vista.

The scheduled spring release of Mac OS X 10.5 (Leopard) will also help Apple rebound from the Vista induced drop in Mac sales. "Although many features of Vista are already available on Appleis current operating system, 10.4 Tiger, Apple is preparing 10.5 Leopard for a Spring release," he said. "With the release of Leopard, Mac market share will benefit from upward pressure from slight pent-up demand."

Mr. Munster is maintaining his "Outperform" rating and US$124 target price for Apple stock. Apple is currently trading in the pre-market at $84.63, down 0.13 (0.15%).